Oil blocks auction to remain open until completion of new PSA, petroleum law – Jagdeo

Jun 23, 2023 ExxonMobil, News, Oil & Gas

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Kaieteur News – The ongoing bid round for 14 of Guyana’s offshore oil blocks will remain open until the country completes the modernisation of its 37-year old Petroleum Exploration and Production Act and the new Production Sharing Agreements (PSAs) to govern the potential resources to be discovered there.

Vice President, Bharrat Jagdeo made the announcement on Thursday at the Office of the President during a media conference. He said: “on the auction, we have to extend it as I said before for another period. We will determine what period. Should not be for much of a time but almost everyone of the people who have indicated an interest so far in participating in the auction, they have been told and I think they appreciate it that we are sticking with our commitment to have the framework law in place and the new PSA before the bids come in.”

The draft legislation was released on Monday by the Ministry of Natural Resources for a two-week consultation while the model PSAs to govern the deep and shallow water blocks are currently being finalised. A British firm, IHS Markit, a renowned international firm that specialises in critical information, analytics and expertise was hired by the government to provide consultancy services in drafting the new legislation. The VP reported that, “A lot of issues where we were deficient have been addressed. A lot of the issues will also be addressed through regulations.”

Jagdeo said he observed comments that the consultation period for the public to provide feedback on the draft bill is too short; however, he believes that the document could be read overnight or even in an hour. On the other hand, he said he has also seen comments that the Bill is shorter than the previous Act. To this end, he explained, “We had a global firm that worked on this with enormous experience in this sector, we looked at similar framework legislation globally and a lot of the issues addressed in those modern pieces of legislation where we were deficient in our laws have been addressed and a lot of the issues would be dealt with subsequently after the passage of the Bill through regulations.”

He said after the passage of the Bill, a series of regulations to give effect to the Bill will be published. These he said are not required for the auction. The VP noted, “We are repealing all of the regulations under the old Act but we’ve looked at if anything would suffer in the absence of the repealed regulations…and most of those regulations deal with reporting issues and a lot of these are already covered in the existing PSAs so there’d be no major gap between the period when we pass the law and repeal the regulations to the enactment of the new regulations.”

Jagdeo said he was reluctant to give a deadline for the closure of the auction since he would have to consult with the Minister of Parliamentary Affairs, Gail Teixeira to confirm the next Sitting of the Assembly as this would impact the deadline.  The draft Bill is now available for public consultation and is available at the following websites: www.nre.gov.gy and www.petroluem.gov.gy. All comments should be sent via email to [email protected] during the period and by close of business on Monday, 3rd July 2023.

President Irfaan Ali announced the commencement of Guyana’s inaugural bid round for 14 of its offshore oil blocks on December 9, 2022. Initially, the auction was expected to run until April 14, 2023, with contracts signed the following month. Subsequently, the Ministry of Natural Resources announced in April 2023 that it has extended the period for submission of bids for the 14 oil blocks on auction.

In a statement to the press, the Ministry of Natural Resources said, “On behalf of the Government of Guyana, (it) is pleased to announce the extension of the Guyana 2022 Licensing Round’s bid submission deadline to July 15, 2023.” This deadline is likely to be further extended pending the passage of the new oil law.

Eleven of the oil blocks on auction are located in the shallow area and three in the deep water zone. Each area is governed by separate PSAs. They range between 1000 square kilometres to 3000 square kilometres with the majority of them being close to 2000 square kilometres. The oil companies will be expected to pay a 10 percent royalty and a 10 percent corporate tax. The cost recovery will be capped at 65 percent in a given year, while profits will be shared 50/50 between the parties.

IHS Markit is taking lead on guiding the Guyana Government on the auction.

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• Auction, extended, Jagdeo, oil, PSA

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